Tuesday, December 16, 2008

Don’t be fooled by low gas prices — the crunch is nearly here

In Greek mythology, the enchanting songs of the Sirens lured unwary sailors to shipwreck and death. Today's Sirens are the roadside signs singing sweetly, "Cheap gas! Cheap gas! Drink deeply and be at ease, weary traveller!"

After suffering record-high oil and gas prices earlier this year, it's understandable that we see cheap gas as anything but a danger. We're in a recession. Times are tough. It's a relief that the cost of getting around and heating our homes has plummeted. It's also an economic stimulus at a time when we need all the stimulus we can get.

But before we drink deeply and relax, let's have a good look through the telescope at what lies ahead.

In November, the International Energy Agency - an intergovernmental organization which advises 28 member countries - released its latest forecast. The current global economic downturn changes the numbers, the IEA concluded, but not in a way that will make a difference in the long term. Between 2006 and 2030, the IEA predicts, worldwide energy consumption will grow 45 per cent.

"Current trends in energy supply and consumption are patently unsustainable," declared Nobuo Tanaka, executive director of the IEA. "Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6° C."

Now, some people continue to deny the reality of man-made climate change. I'm not one of them, but I'd like us all to stay on the same page so I won't even mention climate change for the remainder of this column.

Oil shocks will become more common and more severe. The triggers could be anything. A terrorist attack in the Strait of Hormuz, maybe. A coup in Saudi Arabia. The collapse of Nigeria. Whatever it is, wherever it occurs, it will cause oil prices to explode and economies to fall to their knees.

Canada and every other developed nation runs on oil. It moves our cars and trucks. It heats our homes. It is essential in the manufacture of plastics and countless other products. It is the very foundation of our economy.

But with most of the world's oil production coming from unstable regions far away - and the proportion that comes from places such as the Middle East is growing rapidly - that foundation is not reliable. Tomorrow's headlines could cause it to shake, crack or crumble.

Bad as that sounds, it's likely to turn out even worse.

In preparation for its 2008 report, the IEA conducted a detailed study of depletion rates in 800 of the world's largest oil fields. Nobody had ever done such work before and what the IEA found caused the agency to revise its understanding of the world's energy future in a profound way.

The change has to do with worldwide "peak oil" - which is the point at which global oil production can no longer keep up with global oil demand. That sounds bland and technical, but it's actually a nightmare scenario: If oil demand outpaces oil supply, the price of oil will go up and up and up and never go back down. Imagine the oil shock of 1973 as a permanent reality.

It has always been accepted that the world would get to peak oil one day. The only question is when.

Some over-excited proponents of peak oil have been saying for decades that it would come any day now. More restrained voices say we're at peak now. Or we will be in a few years.

But then the IEA conducted its survey of oil fields and got spooked. "Although global oil production in total is not expected to peak before 2030," the IEA's 2008 report states, "production of conventional oil ... is projected to level off towards the end of the projection period."

That's alarming, but vague. So British journalist George Monbiot asked the IEA's chief economist, Fatih Birol, to elaborate.

The really bad news lies in oil-producing countries that are not members of the OPEC cartel, Birol said. "We are expecting that in three, four years' time the production of conventional oil will come to a plateau, and start to decline."

And worldwide? "In terms of the global picture, assuming that OPEC will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is of course not good news from a global oil supply point of view."

Not good news, indeed. If oil production comes to "a plateau," it's not rising - but demand will be.

That's the nightmare scenario of peak oil. And it starts in 2020.

That's 11 years from now.

Now, for some problems, 11 years is plenty of time to get ready. But not for this problem.

As George Monbiot notes, the U.S. Department of Energy commissioned a report by oil analyst Robert L. Hirsch on how long it would take for developed economies to mitigate the effects of peak oil. Hirsch concluded that even a worldwide emergency response launched 10 years before the crisis hit would still result in "a liquid fuels shortfall roughly a decade after the time that oil would have peaked." That would be a disaster.

In order to avoid this scenario, Hirsch advised, a massive mitigation program must begin at least 20 years before peak.

If a chill didn't run up your spine, you need to read that again.

Fortunately for every man, woman and child on the planet, one of the few politicians who seems to understand the urgency of the situation is the president-elect of the United States.

On Monday, in announcing his energy policy team, Barack Obama noted that presidents since Richard Nixon have recognized that oil addiction is a dangerous vulnerability but all have failed to make real change. "This time has to be different," he said. "This time we cannot fail. Nor can we be lulled into complacency just because, for now, the price of gas has fallen below $4 a gallon."

Obama backed his rhetoric with a daring choice for energy secretary. Rather than appoint a politician who could be counted on to say and do what is politically expedient, Obama picked Steven Chu, a physicist and Nobel laureate who has been leading research into cutting-edge energy technology.

We must have a "global energy revolution," the IEA's Fatih Birol told Monbiot. And it has to start now. "I think time is not on our side here."

* Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008)

* Energy Watch Group in Germany (2006)

Independent studies conclude that global crude oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. And since the U.S. represents one fourth of global oil demand, whatever oil we conserve will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly.

Alternatives will not even begin to fill the gap. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment. The independent scientists of the Energy Watch Group conclude in a 2007 report titled: “Peak Oil Could Trigger Meltdown of Society:”

"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."

With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.

This is documented in a free 48 page report that can be downloaded, website posted, distributed, and emailed: http://www.peakoilassociates.com/POAnalysis.html

I used to live in NH-USA, but moved to a sustainable place. Anyone interested in relocating to a nice, pretty, sustainable area with a good climate and good soil? Email: clifford dot wirth at yahoo dot com or give me a phone call which operates here as my old USA-NH number 603-668-4207. http://survivingpeakoil.blogspot.com/

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